We have bought a house in my name.I am a house wife with no income.The loan is taken in my name.My husband pays the EMIs towards the loan.Can my husband claim this amount as deduction from his taxable income. Seema , Chennai

Since you have no source of income and the house is constructed /bought in your name by the money of your husband and loan being repaid by your husband, the income from such property should be assessed in your husband’s name only as you are only Benamidar of the property. There are clear provisions under I T Act for such diversion of assets without adequate consideration. Section 27 (i) and section 64(1)(iv) are the two provisions which deals with situation described by you.

Section 27(1)

This by virtue of section 27 of the I T Act which reads as under

27. For the purposes of sections 22 to 26—

(i) an individual who transfers otherwise than for adequate consideration any house property to his or her spouse, not being a transfer in connection with an agreement to live apart, or to a minor child not being a married daughter, shall be deemed to be the owner of the house property so transferred;

In the aforesaid provision, although the words” transfer is used which presupposes the ownership by the husband, one has to go by the spirit of the provision. The clause (i) of section 27 is to prevent the diversion of house property income to spouse.

Even Calcutta High Court in CIT vs Hasina Begum (1986) 158 ITR 215 , held that assessing officer can find oput the real owner by establishing who has actually funded the house property.

Section 64

It is legally settled that where the property is purchased or constructed with the help of fund transferred from husband, the clubbing provision u/s 64 (1)(iv) comes into play. he said subsection states as under :

” In computing the total income of any individual, there shall be included all such income as arises directly or indirectly …

(iv) subject to the provisions of clause (i) of section 27, in a case not falling under clause (i) of this sub section, to the spouse of such individual from assets transferred directly or indirectly to the spouse by such individual otherwise than for adequate consideration or in connection with an agreement to live apart.

This so held Andhra Pradesh High Court in case of Dr N kumara Rao vs CIT 169 ITR 128 . The facts of the case was

‘The admitted facts are as follows Smt. Indira, wife of the assessee, purchased a plot of land at Himayat Nagar and Constructed the house bearing No. 3-6-723. The cost of the site is Rs. 10,000. The expenditure incurred for the construction is Rs. 86,502. In total, Rs. 96,502 was spent for the construction of the house. Out of this, it is found by the Tribunal that the assessee contributed a sum of Rs. 34,500. The income derived from the house was determined by the Income tax Officer at Rs. 9,548. In view of the contribution made by the assessee, by exercise of the power under section 64(1)(iv) of the Income tax Act, 1961 (43 of 1961) (for short ” the Act “), the income was apportioned in the ratio of 1 : 3 and 3/4ths of the income in the hands of the assessee was assessed…”

“The next question is whether the Tribunal is justified in arriving at the ratio of 1 : 3. As stated earlier, the total amount invested for constructing the house is Rs. 96,502, out of which Rs. 10,000 was the amount invested by the wife of the assessee to purchase the plot, Rs. 34,500 was transferred by the assessee to his wife in the construction of the house and Rs. 52,000 was the amount which went into the construction from borrowings made in that regard. Section 64 of the Act has no application to outside borrowings. Therefore, the proportion in which the income derived from the property is to be apportioned is 10: 34.5 : 52. Therefore, that part of the income attributable to 34.5 alone is taxable under section 64(1)(iv) of the Act. Instead, the Appellate Assistant Commissioner and the Tribunal wrongly apportioned the income in the ratio of 1 : 3 and assessed 3/4ths of the income derived from the property in the hands of the assessee. That computation is clearly illegal. Therefore, the authorities are directed to compute the income in the above mentioned ratio and determine the taxable income of the assessee accordingly“

Therefore, it is clear when the property is purchased with the help of fund from husband in name of wife , there will be addition of income in proportion of fund invested.

Whether Interest u/s 24 is allowable on loan borrowed by Husband?

In my opinion ,by virtue of the section 27 read with section 64 , the husband has to be considered the owner for the house property to the extent of his contribution in constructing or purchase of house and income from house property to that extent should be computed as per section 22 to 26 of the I T Act. As such , interest u/s 24 of the I T Act should also be allowed .